If you’re an Amazon seller, understanding Amazon’s Inventory Performance Index (IPI) is crucial to growing your business. IPI is the metric calculation used to gauge a Fulfillment by Amazon (FBA) seller’s inventory performance over time. Essentially, Amazon uses this score to determine how well sellers manage their inventory. This type of calculation helps sellers better optimize their inventory. If you are a new seller, you will not have access to an IPI score, as they are generally received at least 15 weeks after you have sent your first item into FBA. Please continue reading and contact the AVASK Group to learn how we can help you navigate your IPI score and maintain balanced inventory levels.
What factors can influence Amazon’s Inventory Performance Index (IPI) score?
Multiple factors influence an IPI score. Firstly, excess inventory percentages, based on historical sell-through rates, are one of the main areas impacting an IPI score. If you have over 90 days of inventory for a specific item, that would be considered an excess percentage. It is imperative to reduce excess inventory to increase profitability. You can use ads, sales, outlet deals, and removal orders to combat excess inventory.
FBA sell-through rates also influence IPI scores. Amazon calculates the FBA sell-through rate by dividing the units shipped in the past 90 days by the average number of units available in the fulfillment center. To boost sales, it’s vital to keep your listing prices competitive. It can be challenging to drive up sales if particular items are not selling. However, like excess inventory, you can use advertising to improve your sell-through rate. Ultimately, it is imperative to increase sell-through to balance your inventory levels.
Moreover, stranded inventory percentages have a direct impact on IPI scores. It is critical to ensure inventory is buyable by fixing listings considered stranded. Stranded inventory percentage refers to the amount of your FB inventory units not currently available for purchase. An issue with a product in your inventory can result in lost sales and storage costs for items not generating revenue.
What are the consequences of a bad IPI score?
With an IPI metric calculation, you can score from 0 to 1,000. Amazon sellers, on average, should maintain a score between 400 and 800. Ideally, you want to achieve at least 550 to protect yourself from inventory storage restrictions and higher storage fees. Amazon can restrict your account, affecting your ability to make inbound shipments. This is only the case if you have an IPI score below 350. Ultimately, to avoid the consequences of low IPI, you should frequently monitor your score, ensuring it is above the minimum threshold by the end of the quarter.
For advice and guidance on improving your business’s profitability through Amazon’s Inventory Performance Index score, contact the AVASK Group today. Our knowledgeable team is prepared to help you find solutions to any inventory issues that may arise.